Boost Business with Purchase Order Financing
Your new business is growing faster than you can process orders and get payment from your customers. This is making buying the items you need from your manufacturers difficult. Utilizing purchase orders to finance allows you to free up your cash flow. Here are reasons this method would work for your company.
What Is Purchase Order Financing
To use purchase order financing, you first must collaborate with your financial institution. Once they are on board with you, you can have them get pricing from the distributor when you receive an order. The lender sends a payment to the distributor when the quote is accepted and the order is completed. When everything is shipped, you will be notified so that you can send the bill to the customer. Your client pays your financial institution instead of you and your lender then sends your portion to you taking you out of the long process.
When You Should Use Purchase Orders
This type of financing works well if you are a startup company who is overwhelmed with the massive amount of orders coming in. It also is beneficial if you have a new product that sells quickly and you need money to keep supply up. This keeps the relationship between you and the source you get the item from solid. It can woo long term distributors with track records of being on time with accurate numbers. You will have access to your money so you can use it for advertising or other expenses while your products are being prepared for your customer.
How To Qualify For This Financing
If this type of loan works well for your business, you will need to contact a lender that specializes in purchase orders. They will look over the credit of your distributors and of the customers that will participate in this and how long it takes them to pay you. They will consider the manufacturing and delivery time for the products in question. You must be able to finance the operations of the business with only this help from a lender instead of multiple financial institutions. You also must do your research as you look for banks to venture into purchase orders with you to ensure you get a low percentage rate as well as assurance that they are reliable. Document how long it will take them to issue the payment to the distributor and verify that it is acceptable with your supplier. Once you have looked into all these options, collaborate with your bank to get things started.